If the Price is Right

One of the favorite targets of progressive folks is sprawl. Sprawl,
in their minds, is ruining communities, causing congestion, isolating
the poor, the young, and the old, even making people fat. I buy all
the arguments but wonder if these folks have thought through their ill
will.

Take Oregonians, for example, as progressive a people as you can get
in our country. In the 1970's, when Portland drew a circle around it
and declared everything outside the circle off-limits to development,
their goal was to make development inside the circle denser.
High-density development, after all, is the counterbalance to sprawl:
it makes car trips shorter, avoids the costly build-out of far-flung
infrastructure, and makes it easier for the very young and the very
old to get around. And high-density development is what should happen
if you draw an urban growth boundary: as the metro area grows and the
population rises, the demand for housing will be met not by growing
out further, but by growing more dense.

Only Oregonians, apparently, didn't want that, either. It's like John
Kitzhaber, former governor of Oregon, once said: "There's two things
people hate: density and sprawl." The marketplace demanded more
housing, but the current residents rejected proposals for new, dense
construction in their neighborhoods.

But it wasn't just an aesthetic distaste or a need for elbow room.
When demand increases, and supply can't increase by growing out or
growing up, what happens? Price goes up. Current residents saw their
housing values skyrocket. Why let in new, dense development that
would alleviate that built-up demand, when you could have more and
more equity building up in your own home?

But let's not pick on Oregonians. Many suburbanites are like this.
With one side of their mouth, they vilify Toll Brothers and other
mega-builders of McMansions on the outskirts of the metro area. But
with the other side of their mouth, they shout down any application
for a high-rise, multi-unit development in their neighborhood. The
thought of farmland being sold off to build a residential complex or a
Walmart offends their progressive hearts, but the thought of having
their house values dampened and their schools burdened by new
neighbors squished into their community offends their rational heads.

The problems of sprawl are still worth figuring out solutions for.
But some of those solutions assume a willingness to do things – like
live in a high-density neighborhood or use public transportation –
that many people just won't do, no matter what the economic
incentives.

That's why I'm feeling urban economist Edwin Mills more and more: just
get the price right. Artificial limits and incentives seem to have
unintended consequences, or even worse, lead to more of what you were
trying to prevent; so instead of stopping people from doing what you
don't want them to do, just make them pay for it. After all, the
economists will tell you that if the price is right, the amount
consumed will be optimal from a market standpoint. When it comes to
things like sprawl, the price is wrong right now, and so too much of
it happens. Raise the price of sprawl (gas tax and impact fees are
two easy ways), and maybe you'll get the right amount of it consumed.